Establishing a second generation ethanol development program to demonstrate efficient use of nontraditional feedstocks for the production of ethanol in association with the commercial scale extraction of grain germ from whole grains; requiring preconstruction approval from the commissioner of agriculture to be eligible for grants, loans or producer payments under the program, specifying certain application requirements, requiring approval to include certification by the commissioner of the maximum plant production for ethanol producer credit payment purposes, limiting the number of gallons per year; requiring the commissioner in evaluating proposals to give priority consideration to plants meeting certain specified criteria; providing for periodic cash producer payments or grain germ extraction research and demonstration grants by the commissioner and appropriating money to the commissioner for the grants, grantees to remain eligible for ethanol producer payments upon inability to scale up grain germ extraction technology to commercial capacity; appropriating money to the commissioner for second generation ethanol development producer payments and for deposit in the ethanol development fund for a certain number of additional loans under the ethanol production facility loan program of the rural finance authority (RFA), requiring loan repayments to be deposited in the value added agricultural product revolving fund (ja)